Strategy’s Stretch (STRC) may be volatile, but it is not comparable to the stablecoin that once underpinned Terra’s ecosystem, according to Benchmark‑StoneX analyst Mark Palmer.
The Bitcoin‑focused firm’s flagship preferred stock is designed to trade near a target price and cannot “de‑peg” in a technical sense, Palmer wrote.
STRC fell to $82.53 last week and recovered to close around $88.65 on Monday.
Strategy’s Stretch (STRC) is under notable pressure, but it does not resemble the stablecoin that destabilized the crypto market in 2022, according to Benchmark‑StoneX’s Mark Palmer.
Although the firm’s preferred stock slipped to record lows last week, Palmer argued that drawing parallels with Terra’s collapsed ecosystem is “fundamentally misguided.”
Palmer said the stock’s weakness has “fueled alarmist commentary on social media,” while overlooking key differences between this dividend‑paying product and the TerraUSD/LUNA tokens that erased $40 billion in market cap when they collapsed.
“STRC is not a stablecoin,” Palmer emphasized. “It is not backed by an algorithmic arbitrage mechanism, nor does it rely on confidence in a reflexive token structure.”
Most stablecoins are backed by cash and U.S. Treasuries. TerraUSD attempted a different approach, using a “mint‑and‑burn” mechanism with its sister token LUNA to artificially maintain its peg, without any hard reserves.
STRC, by contrast, is indirectly backed by Strategy’s Bitcoin holdings. The Virginia‑based firm disclosed that it now owns 847,363 Bitcoin, valued at roughly $54.5 billion at a price of about $64,400 per BTC.
When Terra’s ecosystem unraveled, TerraUSD “de‑pegged,” losing parity with the U.S. dollar as investors lost confidence. The project’s Anchor Protocol was known for offering a 20% annual yield on deposits.
A similar narrative was applied to STRC when the stock fell to $82.53, offering an 11.5% annual dividend. It closed flat at $88.65 on Monday, about 11.3% below its $100 par value, according to Yahoo Finance.
STRC is engineered to trade near $100; when it does, Strategy issues additional shares and uses the proceeds to purchase more Bitcoin. Since its launch less than a year ago, the price has been cyclical.
The stock has lingered below $100 for several weeks, prompting some analysts to expect the company may raise the dividend rate to support a rebound toward the target price.
Strategy also continues to build cash reserves, topping up its USD holdings for three consecutive weeks, signaling to preferred‑stockholders that dividend payments will remain sustainable.
Even if STRC trades below $100, its ability to buy Bitcoin may be limited, but that does not indicate a fundamental flaw, Palmer wrote.
“There is a meaningful difference between saying Strategy’s preferred‑stock funding engine has become less efficient and claiming the company’s overall model is broken, as some detractors suggest,” he added.
Benchmark‑StoneX reaffirmed its $570 price target for Strategy, well above the multi‑year high of $457 reached in October.
Strategy’s common shares fell 2.8% to $109 on Monday, extending a five‑day losing streak.
